Premarital agreements, also commonly known as a “prenup” for short, aren’t as exciting or heartwarming as wedding planning, but they can be just as important.
Many people have an impression that a premarital agreement will encourage a future divorce, when actually having a well negotiated agreement in place can have the reverse effect and start a marriage with a common understanding.
Making a prenuptial plan with your future spouse can lead to open and honest communication ensuring that both of you are on the same page as you start your new life together.
What is a Premarital Agreement?
In Texas, agreements entered into before marriage concerning marital property rights are called premarital agreements, and are governed by Chapter 4 of the Texas Family Code. Other terms commonly used to describe a premarital agreement are prenuptial agreements, prenups, and antenuptial agreements.
Regardless of what you call it, the function remains the same: allowing the couple to “opt out” of the state’s rules regarding marital property rights and duties, and instead, create their own agreement that will govern how they own property.
This agreement is a contract couples sign before getting married to preemptively figure out their finances in the event of a divorce (or death) later down the road.
It is important to clarify that prenups do NOT include child custody or child support matters.
Reasons to Have a Premarital Agreement.
- To protect yourself from your spouse’s debts.
In Texas, marital property may be used to satisfy the debts and liabilities of the other spouse. So even if you didn’t incur the debt, the creditor may look to your community property estate to satisfy the debt. Often, in a premarital agreement, couples will agree that they will not be liable for the debts of the other person. This provision will be enforced during the marriage to protect the spouse who did not incur the debt, and it will also apply in the event of death or divorce.
- To preserve property you owned prior to marriage, and/or acquired by gift or inheritance (also known as separate property).
In Texas, our system of community property already protects a spouse’s separate property, meaning that your separate property is yours and cannot be divided by a court in divorce. However, the burden is on the spouse claiming the separate property to prove by clear and convincing evidence that the property was owned before marriage, or acquired by gift or inheritance. That can be difficult when the parties have been married a long time and/or the property has been commingled with community property. Commingling often occurs when you have a separate property asset that generates income (like interest or cash dividends in a financial account, or rental property). A premarital agreement allows you both to identify your respective separate property, and to provide for income created from that separate property remaining separate property. It can also shift the burden, so that a party disputing the character of the property as “separate property” has to prove that it is not separate.
- To define property distribution upon death or divorce.
When you say “I do,” you are together until death or divorce. A premarital agreement allows you both to determine how the property should be divided in the event of divorce or upon death. This will simplify the divorce process should it ever occur, and will also help protect your spouse from claims to your property from other family members in the event of your death.
- To determine how financial obligations will be shared.
Often, a premarital agreement will provide for the establishment of a joint household account, determine how that account is funded, and lay out how joint living expenses are paid. Having this discussion at the beginning of your relationship can be quite healthy as well as save a lot of heart ache and disagreements in the future.
What Will You Find in a Premarital Agreement?
There are many things usually included in premarital agreements. For example:
- Clear identification of separate property
- Retirement benefits
- Ownership of business interests, property
- Ownership of assets acquired both before and during the marriage
- Income, deductions, and claims for filing your tax returns
- Management of household bills and expenses
- Management of joint bank accounts, if any
- Management of credit card spending and payments
- Management of debts incurred before and during the marriage
- Savings contributions
- Property distribution to the survivor in the event of death, including life insurance benefits
- Method of settlement of potential disagreements, such as using mediation or arbitration
I Want a Premarital Agreement. What do I do now?
The first step is to make a PLAN well in advance of the wedding date!
- Be clear about your motivations for wanting a premarital agreement.
- Meet with an attorney, and determine whether a premarital agreement is recommended for your circumstances.
- Be ready to talk with your future spouse in a loving, open and understanding way about the topic.
- Encourage your future spouse to hire a qualified attorney to represent him or her. If you are the party requesting the agreement, you also need to be prepared to pay for your fiancé’s attorney fees. Having a qualified attorney representing your future spouse is very important if the agreement is ever challenged in the future.
- Consider using the Collaborative Process to negotiate the terms of your premarital agreement. The Collaborative Process will give you the opportunity to discuss your goals and objectives in a more collaborative way, and allow you to negotiate an agreement you both will feel good about. More traditional methods of negotiating a premarital agreement often leave newlyweds with a heightened sense of distrust and discord, and that’s not a great way to start a marriage.
- Allow yourself plenty of time to negotiate the agreement. Ideally, you should start the process several months in advance of the wedding date so that the process is complete in time for you to focus on the happy event.
Drafting a prenuptial agreement can be quite sensitive. We can help you put together a plan that gets you started on the right foot along the path to a happy marriage.
At Hargrave Family Law we are committed to minimizing difficult situations by incorporating creative and professional solutions in a manner that is responsive and sensitive to your needs.
If you’re ready to start discussing your premarital agreement, give us a call today!